The Frankfurt state court ruled that 36-year-old Magnus Gaefgen deserved the damages because his human rights had been violated by the deputy police chief's threat during questioning about the missing boy. But the court rejected Gaefgen's claim that he had suffered trauma as a result and should receive euro10,000 in compensation.
"Based on the evidence, it is much more likely that this (trauma) is to be attributed to the experience of killing the victim," Judge Arne Hasse wrote in his ruling. Gaefgen also was ordered to pay the bulk of the costs of the trial.
Criticism of the ruling was swift and sharp, recalling the outrage provoked by the October 2002 crime itself.
Eleven-year-old Jakob von Metzler, the son of a prominent Frankfurt banking family, went missing for four days; it eventually turned out he had been kidnapped and murdered by Gaefgen, then a 27-year-old law student.
Gaefgen confessed in 2003 to kidnapping Metzler in an effort to win euro1 million in ransom and impress his girlfriend. When the boy began to fight back and shout, Gaefgen said, he strangled him. He was convicted of kidnapping and murdering Metzler and sentenced to life in prison.
Reacting to Thursday's ruling, Veith Schiemann of the victims' lobby group Weisser Ring said: "Despite the clear violation of his rights, payment of damages is not called for."
The German police union said, "The ruling overshadows the truly terrible crime - the murder of a child."
The court decision also sparked a firestorm of commentary online, with German Twitter users making it a top trending topic within hours.
"The ruling upsets people, but the rule of the law left the judge with no other choice," wrote Dietmar Seher in a commentary for Germany's WAZ media group.
In the past seven years, Gaefgen has repeatedly gone to court in a dogged attempt to challenge his conviction and win compensation for the threat made during the interrogation, taking his case to the European level.
In June 2010, the Strasbourg-based court ruled that while the threat amounted to inhuman treatment, it was "not sufficiently cruel to amount to torture" and no retrial was necessary.
The Frankfurt deputy police chief who made the threat of violence was convicted of inducing abuse of authority in 2004 and sentenced to a year's probation. He has since retired from the force.
Judge Hasse cited earlier court findings that the officer had not respected Gaefgen's rights at the time he made the threat - which he did before it was known that the plaintiff had killed the boy - but maintained that did not excuse the threat.
"The right to respect of dignity cannot be removed from a criminal, even if he has broken the value system in such a severe and unbearable manner," Hasse said.